Social Enterprises: The "Silver Bullet"?

As I mentioned in my previous post, I have been deciding what to share in my final post. Should I talk about culture in India? My personal adventures throughout this vast and diverse country? My life in the most cosmopolitan and populous city in India?

I could speak about my experiences but because I know I'm coming back soon (or at least to another emerging market), I've decided to share what I've learned from early-stage social entrepreneurs in India which  is far more interesting... well ,for me at least! So what have I learned?

Focus on doing one thing well: Early-stage entrepreneurs usually have limited resources to get their product or service to market and start gathering feedback and generating revenue.  Entrepreneurs have a choice: do many things poorly or focus on doing one thing (or a few things) well. From my conversations, the entrepreneurs that choose to focus on one thing tend to have a more coherent pitch, vision and plan of action to achieve the vision. As a MBA student, this lesson hits home even more. In business school, you are inundated with opportunities - professionally, socially, and academically. Would you rather attend that corporate presentation tonight, study for an upcoming exam, attend a social event for your favorite club, or go to a happy hour with your friends? Logistically, you can't do everything. Fortunately, what you decide underlies that which you value most thereby (hopefully) leading to a more defined focus.

Understand who your customers are and listen to them often: Rather than try to sell to everyone at once, entrepreneurs are more likely to succeed if they take the time to first understand who to sell to and work to meet their needs. Entrepreneurs that pay attention to their customers, peers, and even competitors have a much higher chance of survival. For example, during my conversation with Chachii, the co-founder had identified peers in India and abroad to better understand their models. With this analysis, the entrepreneur further differentiated her service while identifying potential exit opportunities. Another common thought among entrepreneurs is that "if you build it, they will come" which is especially prevalent for entrepreneurs with a technically superior product. Although your product or service may be the next best thing, the ultimate judge for any entrepreneur should be the market and their customers. Numerous cases, such as Betamax vs VHS or the more recent Blu-Ray vs HD DVD, demonstrate that business success hinges less on your amazing and technologically advanced product specifications than on your ability to listen to your customers and execute on your model.

Focus on business model first, social impact second: Without a viable business model, any social impact that a social entrepreneur generates is short-lived (note: my definition of a social enterprise is one that seeks financial and social/environmental returns.) Although understanding the context of the social or environmental issue that an entrepreneur is trying to address, the immediate questions that come to mind all relate to an entrepreneur's business model including:

"Have you identified a market with customers who have some willingness to pay?",

"How do you plan to offer your product or service cost-effectively to eventually generate profits?", and

"What or who stands in your way and how do you plan to address that?"

For social entrepreneurs, the last question is one of the toughest since achieving social impact usually involves changing behavior and these enterprises face the toughest competitor: the status quo with customers who are usually resistant to change regardless of how the product or service could "change their lives". For example, solar lamps and cookstoves provide a safer and cleaner alternative than kerosene as light or fuel for cooking, respectively. Plenty of entrepreneurs sell these but few have managed to convince potential customers to switch, differentiate themselves and achieve scale.

Play well with others: Besides overcoming the status quo, social entrepreneurs occupy a unique space as they usually try to offer something that the government has failed to do (or at least, do well), non-profit organizations provide free or at cost like water or food, incumbents "offer" usually in the form of exploitation, or any combination of the three. Social entrepreneurs need to understand if, when, and how to engage with these players to create a market with fewer distortions thereby leading to sustainable and long-term change. For example, NextDrop has worked with the local water utility from day one because without the utility's buy-in (agreement), NextDrop would not have been able to launch its SMS service.

A market-based approach is not the end all be all for poverty alleviation or any other socio-economic or environmental issue. Humanitarian aid to countries or regions in conflict or post-major natural disaster, for example, is the most feasible solution despite its shortcomings and criticism. At the same time, my experiences with social enterprises and non-profits have convinced me that social enterprises have the potential to address most socio-economic issues. They, however, need to closely collaborate with government and the social sector to adequately address the complex, inter-related nature of these issues. Market-based approaches and especially social enterprises are not the "silver bullet". But they should lead the way to achieve real and sustainable social change.